Income Tax Appellate Tribunal - Delhi
C.P. Kukreja Associates Pvt. Ltd., New ... vs Acit, New Delhi on 28 August, 2017
1
I. T. Appeal No. 2224/Del/2012
Assessment Year : 2008-09.
IN THE INCOME TAX APPELLATE TRIBUNAL
[ DELHI BENCHES: "B" NEW DELHI ]
BEFORE SHRI I. C. SUDHIR, JUDICIAL MEMBER
AND SHRI L. P. SAHU, ACCOUNTANT MEMBER
I. T. Appeal No. 2224/Del/2012
Assessment Year : 2008-09.
C.P. Kukreja Associates Pvt. Ltd., Asstt. Commissioner
D - 1, Ashirwad Building, Vs. of Income Tax,
Green Park, Circle : 3 (1),
New Delhi - 110 016. New Delhi.
PAN : AAACC 4043 L
(Appellant) (Respondent)
Assessee by : Dr. Rakesh Gupta; Adv.;
Department by : Shri Anil Kumar Sharma, Sr. D. R.;
Date of Hearing : 11.05.2017
Date of Pronouncement : 28.07.2017
O R D E R.
PER I. C. SUDHIR, J. M. :
The assessee has questioned first appellate order on the following
grounds :-
" 1. On the facts and in circumstances of the case ld. CIT
(Appeals) has erred in law and on facts in confirming the
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I. T. Appeal No. 2224/Del/2012
Assessment Year : 2008-09.
action of ld. Assessing Officer in imposing the penalty under
section 271(1)(c) of the Act amounting to Rs.9,07,790/-;
2. Assessee company has neither conceal any particular of
income nor furnish inaccurate particular of such income, no
penalty under section 271(1)(c) of the Act should have been
imposed;
3. The impugned penalty is imposed unlawfully and
arbitrarily. The impugned penalty order is bad in law,
unjustified and against facts and record of the case. "
2. Heard and considered the arguments advanced by the parties in
view of orders of the authorities below, material available on record and
the decisions relied upon.
3. The relevant facts are that the assessee company engaged in the
business of professional activities of architects and engineering, had
declared its income of Rs.5,02,84,793/- in its return of income during
the year. The case was selected for scrutiny and assessment was framed
under section 143(3) of the Act. During the course of assessment it was
noticed by the Assessing Officer that assessee company has leased out
two properties, one at Gurgaon to Spencers Retail Ltd. and another at
Ghaziabad to M/s. Aero Club and M/s. Universal Fashion Wears. The
Assessing Officer noted further that out of these two properties, rental
income was declared only from the property at Shop No. S-13, EDM,
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I. T. Appeal No. 2224/Del/2012
Assessment Year : 2008-09.
Kaushambhi, Ghaziabad and rental income from property at Gurgaon
was not disclosed by the assessee company. Show cause notice was
issued to the assessee to explain the reasons for not disclosing the rental
income from its property at Gurgaon. In response the assessee company
offered the rental income from the property at Gurgaon amounting to
Rs.25,20,000/- for taxation. The assessee company further offered an
amount of Rs.74,789/- as rental income from the property at Ghaziabad,
which was not offered in the return of income. The Assessing Officer
accordingly taxed these rental income in the assessment and besides, he
also disallowed an amount of Rs.75,974/- under section 14A of the Act
and added it to the total income of the assessee. The total addition of
Rs.26,70,763/- was made on the assessed total income at
Rs.5,29,55,562/- in the assessment framed under section 143(3) of the
Act. Penalty proceedings were initiated under section 271(1)(c) of the Act
and being not satisfied with the explanation of the assessee, the
Assessing Officer has levied penalty of Rs.9,07,790/- on the addition of
Rs.26,70,763/- on account of furnishing inaccurate particulars of the
income. The ld. CIT (Appeals) has also upheld the same. The assessee
has questioned actions of the authorities below in imposing and
upholding the penalty in question.
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I. T. Appeal No. 2224/Del/2012
Assessment Year : 2008-09.
3.1 In support of the grounds, the ld. AR, Dr. Rakesh Gupta,
Advocate, submitted that the assessee is a company of architects dealing
with the real estate and being into the profession, follows cash system of
accounting since the last 15 years. Rental income was treated as
business income and was also offered on cash basis. Therefore, the
rental income in respect of Gurgaon property, which was leased during
the year itself, viz. 13.11.2007 was offered on receipt basis in assessment
year 2009-10, for which return of income was filed on 30.09.2009 i.e.
much before the impugned issue was raised by the Assessing Officer.
The present assessment was made on 3.12.2010. The ld. AR submitted
that the said income was already returned, but in assessment year 2009-
10 and there was no concealment as such or any attempt to avoid tax as
sought to be portrayed by the Assessing Officer in the impugned
assessment order. He placed reliance on page Nos. 9 to 12 of the paper
book, which is copy of original return for assessment year 2009-10 filed
on 30.09.2009 showing the rental income from Gurgaon property being
part of business income and page Nos. 13 to 15, which is copy of revised
return for assessment year 2009-10 filed on 26.03.2011 excluding the
rental income Gurgaon from the computation from assessment year
2009-10 after the issue was raised by the Assessing Officer in
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I. T. Appeal No. 2224/Del/2012
Assessment Year : 2008-09.
assessment year 2008-09. The ld. AR further placed reliance on page
Nos. 1 to 5 of the paper book, which is the assessment order for
assessment year 2009-10. Page Nos. 17 to 41 of the paper book contains
copy of return, audit report in balance sheet, which shows [at page 22 of
the paper book] cash method of accounting and since rent was shown as
business income, the income was offered on the basis of cash method of
accounting only. The ld. AR placed reliance on page No. 43 of the paper
book, which is copy of letter to the Assessing Officer which shows that
the rent of Gurgaon property was received on 16.06.2008 [Page Nos. 65
& 66 of the paper book] i.e. in assessment year 2009-10 and therefore,
as per cash method of accounting it was offered to tax next year and
credit for TDS was also claimed in assessment year 2009-10. Page No.
17 of the paper book is the computation for assessment year 2008-09
and page No. 5 of the paper book shows that there was no impact of tax
by showing rental income in assessment year 2009-10 instead of
assessment year 2008-09 as the tax rate being same. Page No. 47 is
explanation to the Assessing Officer. The ld. AR placed reliance on page
Nos. 48 to 54 of the paper book, which are submissions during the
penalty proceedings.
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I. T. Appeal No. 2224/Del/2012
Assessment Year : 2008-09.
3.2 The ld. AR also placed reliance on page Nos. 65 to 72 of the
paper book, which are the submissions before the ld. CIT (Appeals)
submitting, inter alia, that TDS certificate for Gurgaon property was
issued consolidatedly for two years by the tenant and that also
contributed to the offering of rental income on receipt basis. Page No. 69
of the paper book shows that the rent from Gurgaon property was
received in assessment year 2009-10 and Page Nos. 70 & 71 are the
copies of payment advises. Page No. 72 is the consolidated TDS
certificate showing amount paid after 31.03.2008. The ld. AR also placed
reliance on page Nos. 74 to 80 of the paper book, which are copies of
ledgers of rent received for assessment years 2008-09 and 2009-10.
Page Nos. 81 and 82 of the paper book shows explanation to the
Assessing Officer.
3.3 Regarding non-disclosure of rent of Kaushambhi (Ghaziabad)
property, the ld. AR also placed reliance on page No. 67 of the paper
book, which shows that the Assessing Officer assessed income at
Rs.3,66,919/- as against Rs.3,34,127/- offered for taxation by the
assessee company. He further submitted that the rental income for
the month of March, 2008 has been credited to Profit and Loss
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I. T. Appeal No. 2224/Del/2012
Assessment Year : 2008-09.
account for the year ended 31st March, 2009 and offered to tax in
assessment year 2009-10.
3.4 Other component for which penalty was levied was
disallowance under section 14A. Reliance was placed on the decision
of Hon'ble Supreme Court in the case of Reliance Petro Products
Ltd. (2010) 322 ITR 158 (SC). The ld. AR for the assessee also relied
on the other components of service tax, which was reduced by the
assessee from rental income as there was always fluid situation as
to who would bear it. He reiterated that this cannot be the basis of
penalty. The ld. AR cited following decisions :-
(i) Chennai Properties & Investments Ltd. Vs. CIT (2015)
373 ITR 673 (SC);
(ii) CIT & Anr. Vs. M/s. SSA'S Emerald Meadows & Anr.
in I.T.A. No. 380 of 2015 dated 23.11.2015
[High Court of Karnataka at Bengaluru];
(iii) CIT Vs. M/s. SSA'S EMERALDS MEADOWS
SLP to Appeal [CC No.11485/2016] dated 5.08.2016;
(iv) CIT Vs. M/s. Vishnu Industrial Gases P. Ltd.
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I. T. Appeal No. 2224/Del/2012
Assessment Year : 2008-09.
ITR No. 229/1988 dated 6.05.2008 [Delhi High Court];
(v) CIT & Anr. Vs. Dinesh Kumar Goel (2011)
331 ITR 10 (Del.);
(vi) CIT Vs. Vee Gee Industrial Enterprises
In Income Tax Appeal No. 187 of 2014 dated 28.07.2015
[Punjab & Haryana High Court];
(vii) Sri Nilaya AR Projects Vs. ITO
in ITA. No. 1572/Hyd./2013 dated 4.01.2017.
3.5 The ld. Sr. DR, Shri Anil Kumar Sharma, on the other hand,
placed reliance on the orders of the authorities below. He submitted
that the assessee came forward with the payment of due tax, avoided
by it on the concealed income. The assessee had filed inaccurate
particulars of its income, hence the Assessing Officer was justified
in invoking the provisions laid down under section 271(1)(c) of the Act
for levy of penalty in question.
3.6 After having gone through the orders of the authorities below, we
find that the penalty under section 271(1)(c) at Rs.9,07,790/- on the
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I. T. Appeal No. 2224/Del/2012
Assessment Year : 2008-09.
addition of Rs.26,70,763/- on account of furnishing inaccurate
particulars of the income regarding non-declaration of the rental income
from property at Gurgaon, offering an amount of Rs.74,789/- as rental
income from the property at Ghaziabad and non-disallowance made
under section 14A of the Act. During the course of assessment
proceedings, when the above fact was pointed out by the Assessing
Officer to the assessee and show cause notice was issued, calling for
explanation of the assessee in this regard, the assessee responded with
explanation and offered rental income of Rs.25,20,000/- from the
property at Gurgaon and Rs.74,789/- as rental income from the property
at Ghaziabad for taxation. The Assessing Officer also made disallowance
of Rs.75,974/- under section 14A of the Act. The Assessing Officer was
not satisfied with the explanation of the assessee and while making total
addition of Rs.26,70,763/- on the above accounts, levied penalty under
section 271(1)(c) of the Act at Rs.9,07,790/- on the above addition. The
ld. CIT (Appeals) has upheld the same. The authorities below have
justified the levy of penalty mainly on the basis that had it not been
pointed out to the assessee that the above rental income had remained to
be offered for taxation and the assessee had not made any disallowance
under section 14A, the assessee would not have offered those income for
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I. T. Appeal No. 2224/Del/2012
Assessment Year : 2008-09.
taxation. It was alleged that by the above action of the assessee, the
assessee had furnished inaccurate particulars of income leading to levy
of penalty in question.
3.7 On consideration of the explanation offered by the assessee, we
find that regarding the non-disclosure of rental income of Gurgaon
property, the submission of the assessee remained that it is in the
profession of architect dealing with the real estate and being into this
profession, it follows cash system of accounting since last 15 years.
Rental income was treated as business income and was also offered for
tax basis. Therefore, the rental income in respect of Gurgaon property,
which was leased during the year itself on 13.11.2007 was offered on
receipt basis in assessment year 2009-10 for which return of income was
filed on 30.09.2009 i.e. much before the impugned issue was raised by
the Assessing Officer. It was submitted that present assessment was
made on 3.12.2010. It was also submitted that said income was already
returned, but in assessment year 2009-10 and thus, there was no
concealment or no attempt to avoid tax as sought to be portrayed by the
Assessing Officer. In support the assessee filed original return for the
assessment year 2009-10 filed on 30.9.2009 showing the rental income
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I. T. Appeal No. 2224/Del/2012
Assessment Year : 2008-09.
from Gurgaon property being part of business income. It also furnished
revised return for assessment year 2009-10 filed on 26.03.2011
excluding the rental income Gurgaon from the computation from
assessment year 2009-10 after the issue was raised by the Assessing
Officer in the assessment year 2008-09. Copy of the assessment order
for assessment year 2009-10 was also filed with the copy of return, audit
report and balance sheet showing that cash method of accounting was
followed and since rent was shown as business income, the income was
offered on the basis of cash method of accounting only. It was submitted
that the rent of Gurgaon property was received on 16.06.2008 i.e. in the
assessment year 2009-10 and, therefore, as per cash method of
accounting it was offered to tax next year and credit for TDS was
also claimed in the assessment year 2009-10. It was contended by the
assessee that no impact of tax by showing rental income in assessment
year 2009-10 instead of assessment year 2008-09 was there as the tax
rate being same. The assessee submitted that TDS certificate for
Gurgaon property was issued consolidatedly for two years by the tenant
and that also contributed to the offering of rental income on receipt
basis. In support the assessee has filed copies of payment advices,
consolidated TDS certificate showing amount after 31.03.2008, ledger of
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I. T. Appeal No. 2224/Del/2012
Assessment Year : 2008-09.
rent received for assessment years 2008-09 and 2009-10. We thus find
that the assessee has been able to offer bona fide reasons for not
disclosing the rental income from its property at Gurgaon and thus in
absence of positive evidence beyond doubt regarding furnishing of
inaccurate particulars of income or concealment of particulars of income
towards the said rent, the Assessing Officer was not justified in invoking
the penal provisions of section 271(1)(c) of the Act for levy of the
impugned penalty. The action of the ld. CIT (Appeals) in upholding the
same was not correct. We accordingly direct the Assessing Officer to
delete the penalty in this regard.
4. So far as rental income in respect of Kaushambhi (Ghaziabad)
property is concerned, the explanation of the assessee remained
that rental income for the month of March, 2008 was credited to the
profit and loss account for the year ended on 31.03.2009 and was
offered to tax in assessment year 2009-10. We thus find that the
assessee was able to explain the non-disclosure of rental income in
respect of the above property during the year and it cannot be said
that it was a case of furnishing of inaccurate particulars of income
in this regard especially when the assessee had paid tax on it when
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I. T. Appeal No. 2224/Del/2012
Assessment Year : 2008-09.
the Assessing Officer was not satisfied with the explanation of the
assessee. Regarding the disallowance made under section 14A of the
Act, we are of the view that it remained a debatable issue and it
cannot be said beyond doubt that non-disallowance of expenditure
under section 14A by the assessee was furnishing of inaccurate
particulars of income or concealment of particulars of income to attract
the penal provisions of section 271(1)(c) of the Act. The Assessing
Officer is thus directed to delete the penalty in this regard as well.
The ground Nos. 1 to 3 are accordingly allowed.
5. In result, appeal is allowed.
6. The order is pronounced in the Open Court on : 28 th July, 2017.
Sd/- Sd/-
( L. P. SAHU ) ( I. C. SUDHIR )
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated : the 28th July, 2017.
*MEHTA*
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I. T. Appeal No. 2224/Del/2012
Assessment Year : 2008-09.
Copy of the Order forwarded to:-
1. Appellant;
2. Respondent;
3. CIT;
4. CIT (Appeals);
5. DR, ITAT, ND.
BY ORDER
ASSISTANT REGISTRAR Date Draft dictated on 28.07.2017 Draft placed before author 28.07.2017 Draft proposed & placed before the second member Draft discussed/approved by Second Member.
Approved Draft comes to the Sr.PS/PS Kept for pronouncement on File sent to the Bench Clerk Date on which file goes to the AR Date on which file goes to the Head 15 I. T. Appeal No. 2224/Del/2012 Assessment Year : 2008-09.
Clerk.
Date of dispatch of Order.
16I. T. Appeal No. 2224/Del/2012 Assessment Year : 2008-09.